What is reverse bidding and how will it benefit the BCCI, affect new franchises?

IPL chairman Rajeev Shukla earlier said that the base price for the reverse bid from the central revenue pool is Rs 40 crore.

Last Updated: Dec 08, 2015, 11:27 AM IST
What is reverse bidding and how will it benefit the BCCI, affect new franchises?

New Delhi: In it's bid to find two new teams for the Indian Premier League (IPL), the Board of Cricket for Control in India (BCCI) has included a unique clause of reverse bidding in the franchise auction which will be held in national capital on Tuesday.

What is reverse bidding?

The classical definition of reverse bidding or reverse auction states: "In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place bids for the amount they are willing to be paid for the good or service, and at the end of the auction the seller with the lowest amount wins."

Earlier explaining the process, IPL chairman Rajeev Shukla said that the base price for the reverse bid from the central revenue pool is Rs 40 crore.

"It will be a walk in bid on December 8. The base price for reverse bid from central revenue pool is Rs 40 crore and the party which bids for lowest share from central revenue pool will be the winner of new team," he said.

How will the reverse bidding process benefit the Indian board?

The board is likely to benefit through this process as well.

Explaining the logic behind it, a senior BCCI official told ESPN Cricinfo, "If you want to be in the business and if you want to make business sense out of it, and from the standpoint of comparatives, you don't want to upset the valuation of existing franchises."

"It's a pure business call. As far as the economics is concerned, BCCI's central revenue is a substantive amount and far higher than the franchise fee for the original eight franchises, of which six of them are standing. So, it didn't make sense for us to put a tender out, putting a reverse price and ownership for two years," the official added.

The two winning teams will replace Chennai Super Kings and Rajasthan Royals for the next two years in the cash-rich tournament.

Chennai Super Kings and Rajasthan Royals have been banned for two years after former BCCI president N Srinivasan's son-in-law Gurunath Meiyappan and Raj Kundra were found guilty for their involvement in spot-fixing and betting scandal. Both have been banned for life on recommendations of the Supreme Court-appointed Justice Lodha Committee.